Brent crude oil erases 2013 gains, slips on US budget cuts

Brent crude prices fell to a six-week low below $110 per barrel on Friday, erasing all gains so far in 2013 as political gridlock in Washington was set to trigger automatic U.S. budget cuts.

Since hitting a nine-month high of $119.20 in early February, Brent has dropped by around $9 a barrel over the last three weeks as concerns about oil demand during a sluggish economic recovery have reemerged.

In Washington on Friday, $85 billion in automatic spending cuts known as "sequestration" were about to kick in as the White House and Republicans remained at loggerheads over the federal budget, weighing on the economy of the world's largest oil consumer.

The International Monetary Fund (IMF) has warned the cuts could knock at least 0.5 percentage points off U.S. economic growth this year and weigh on the rest of the global economy.

"Despite some green shoots in the United States, the growth forecast remains mediocre, unemployment stubbornly high and economic data inconsistent," said oil brokerage PVM in a note to clients.

Brent crude futures fell to a low of $109.82, their weakest since mid-January, before paring losses after the release of data showing that the pace of growth in the U.S. manufacturing sector picked up in February.

Brent settled at $110.40, down 98 cents on the day and taking losses to week to $3.69 a barrel for the third consecutive weekly loss.

U.S. crude fell $1.37 to settle at $90.68, taking losses for the week to $2.45. The front-month contract for April delivery hit a low of $90.04, the weakest since December, and tested below its 200-day moving average at $90.38 a barrel, a key indicator of market sentiment watched by traders.

Crude oil exports from the Organization of the Petroleum Exporting Countries also rose in February, a Reuters survey found, marking the first monthly increase since October and further weighing on prices.

Supply from the 12-member Organization of the Petroleum Exporting Countries was 30.32 million barrels per day (bpd), up from 30.21 million bpd in January, the survey of shipping data and sources at oil firms, OPEC and consultants found.

Weak growth data out of Europe and China added to fears the global economic recovery is still sputtering.

European surveys showed British manufacturing shrank unexpectedly in February while France's factories suffered their 12th straight monthly fall in output. Also falling was industrial activity in Spain and Italy.

In China, domestic and foreign demand slackened as the official Purchasing Managers' Index (PMI) missed expectations, coming in at 50.1, the government said on Friday. This was its lowest reading since September.

Chinese data showing factory growth cooled in February also dampened the mood on commodity markets.

"China is the main economic and oil demand growth engine of the world," said Dominick Chirichella of the Energy Management Institute in New York.

"If China's manufacturing is slowing it strongly suggests that oil consumption in China is going to also slow." (Additional reporting by Gabriel Debenedetti in New York, Dasha Afanasieva in London and Luke Pachymuthu in Singapore; Editing by Jason Neely, David Gregorio and Chizu Nomiyama)